Ellison v. Alexander

• Decision Date: 19 October 2010
• Docket Number: No. COA09-1240.,COA09-1240.
• Citation: 700 S.E.2d 102
• Court: North Carolina Court of Appeals
• Parties: Scott ELLISON, James Ellison and Paul Ellison, Plaintiffs v. C. Rudy ALEXANDER, Defendant.

700 S.E.2d 102

Scott ELLISON, James Ellison and Paul Ellison, Plaintiffs
v.
C. Rudy ALEXANDER, Defendant.

No. COA09-1240.

Court of Appeals of North Carolina.

Oct. 19, 2010.

700 S.E.2d 103

COPYRIGHT MATERIAL OMITTED.

700 S.E.2d 104

Appeal by defendant from judgment entered 2 July 2009 by Judge Linwood O. Foust in Mecklenburg County Superior Court. Heard in the Court of Appeals 23 February 2010.

Martin & Jones, PLLC, Raleigh, by Hoyt G. Tessner, and Walter McBrayer Wood, for Plaintiff-appellees.

Rayburn Cooper & Durham, P.A., Charlotte, by Ross R. Fulton and Daniel J. Finegan, for Defendant-appellants.

ERVIN, Judge.

Defendant C. Rudy Alexander appeals from an order denying his motions to dismiss, for judgment on the pleadings, and to stay the proceedings stemming from the claims advanced by Plaintiffs Scott Ellison, James Ellison and Paul Ellison and to require that those claims be submitted for arbitration on the grounds that Defendant is entitled to enforce arbitration agreements between Plaintiffs and The Elevator Channel, Inc.” (The Elevator Channel). ¹ After careful consideration of Defendant's appellate challenges to the trial court's order in light of the record and the applicable law, we reverse.

I. Factual Background

On 22 September 2008, Plaintiffs filed a complaint against Defendant seeking compensatory and punitive damages for fraud, constructive fraud, breach of fiduciary duty, and unfair and deceptive trade practices. ² According to Plaintiffs, Defendant was the chief executive officer (CEO) and director of a company known as The Elevator Channel. ³ Plaintiffs' claims against Defendant stemmed from allegations that he had induced them to invest in The Elevator Channel by misrepresenting certain material facts about his personal background and other matters. More particularly, Plaintiffs allege that Defendant falsely represented that “[h]e was a college graduate with degrees in marketing and finance;” that “[h]e was a vice-president in a multinational corporation in charge of international accounts;” that “[h]e ran a successful and financially sound corporation;” that “[o]ngoing investments from other investors for the benefit of The Elevator Channel, Inc. were being investigated and completed;” that “[t]he investments in The Elevator Channel, Inc. [were] being used for the benefit of the corporation and its shareholders;” that “[h]e and his family had made personal financial investments in The Elevator Channel, Inc.;” that “[h]e has extensive international experience in operation, management, operations, finance, strategic planning, business and

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product development, sales and marketing in both public and startup companies;” that “[h]e [has] recruited and assembled a strong management team, developed the company strategy and implemented an operating plan;” that “[h]e was successfully installing The Elevator Channel, Inc. proprietary information in elevator cabs in the Charlotte area;” and that “[t]he Elevator Channel would be profitable by the third quarter of 2006.” As a result of these alleged misrepresentations, Plaintiffs claimed to have “justifiably relied on Defendant's misrepresentations of material facts to their detriment” and to have “suffered damages in excess of $10,000.00” as a result of Defendant's conduct.

On 18 December 2008, Defendant filed a motion seeking the dismissal of Plaintiffs' complaint. On 26 February 2009, Defendant filed an answer to Plaintiffs' complaint in which he denied the material allegations of Plaintiffs' complaint, sought dismissal of Plaintiffs' claims, and asserted that, if the proceedings that Plaintiffs had initiated were not dismissed, they should be “stayed, pending arbitration of Plaintiffs' claims” pursuant to an arbitration clause contained in Section VII of the Subscription and Shareholder Agreements (SSAs) signed by Plaintiffs on each occasion when they purchased shares in The Elevator Channel. On 26 February 2009, Defendant filed a separate motion “to stay in favor of binding arbitration or, in the alternative, for judgment on the pleadings.” On 12 March 2009, Plaintiffs signed a memorandum in opposition to Defendant's dismissal motion and a memorandum in opposition to Defendant's request for a stay. ⁴

On 17 March 2009, the trial court conducted a hearing on Defendant's motions. On 2 July 2009, the trial court entered an order denying Defendant's motions for dismissal and judgment on the pleadings and denying Defendant's motion for a stay and to compel arbitration on the grounds that “a valid agreement to arbitrate the disputes at issue did not exist among the parties.” Defendant noted an appeal to this Court from the trial court's order.

II. Legal Analysis A. Appealability

“A judgment is either interlocutory or the final determination of the rights of the parties.” N.C. Gen.Stat. § 1A-1, Rule 54(a) (2009). “An interlocutory order is one made during the pendency of an action, which does not dispose of the case, but leaves it for further action by the trial court in order to settle and determine the entire controversy.” Veazey v. Durham, 231 N.C. 357, 362, 57 S.E.2d 377, 381 (1950). The order from which Defendant has appealed is interlocutory in nature.

“As a general rule, interlocutory orders are not immediately appealable.” Turner v. Hammocks Beach Corp., 363 N.C. 555, 558, 681 S.E.2d 770, 773 (2009) (citing Davis v. Davis, 360 N.C. 518, 524, 631 S.E.2d 114, 119 (2006)). However, immediate appeal of interlocutory orders and judgments is available when the interlocutory order or judgment affects a substantial right under N.C. Gen.Stat. §§ 1-277(a) and 7A-27(d)(1). Sharpe v. Worland, 351 N.C. 159, 161-62, 522 S.E.2d 577, 579 (1999), disc. review denied, 352 N.C. 150, 544 S.E.2d 228 (2000). “[A]n order denying arbitration is immediately appealable because it involves a substantial right, the right to arbitrate claims, which might be lost if appeal is delayed.” Martin v. Vance, 133 N.C.App. 116, 119, 514 S.E.2d 306, 308 (1999). Thus, Defendant's challenge to the denial of his motion to stay the proceedings and compel arbitration is properly before us.

B. Standard of Review

The ultimate issue raised by Defendant's appeal is whether the trial court erred by denying Defendant's motion to compel arbitration.

The determination of whether a dispute is subject to arbitration involves a two pronged analysis; the court must ascertain both (1) whether the parties had a valid agreement to arbitrate, and also (2) whether

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“the specific dispute falls within the substantive scope of that agreement.”

Raspet v. Buck, 147 N.C.App. 133, 136, 554 S.E.2d 676, 678 (2001) (quoting PaineWebber Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir.1990)). “The law of contracts governs the issue of whether an agreement to arbitrate exists.” Brown v. Centex Homes, 171 N.C.App. 741, 744, 615 S.E.2d 86, 88 (2005) (citing Routh v. Snap-On Tools Corp., 108 N.C.App. 268, 271, 423 S.E.2d 791, 794 (1992)). In addressing a request to compel arbitration, we recognize that:

Because the duty to arbitrate is contractual, only those disputes which the parties agreed to submit to arbitration may be so resolved. To determine whether the parties agreed to submit a particular dispute or claim to arbitration, we must look at the language in the agreement, viz., the arbitration clause, and ascertain whether the claims fall within its scope. In so doing, “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” This is so because public policy in this State, like federal policy, favors arbitration. Because federal policy and the policy of this State are the same in this regard, it is appropriate to look to federal cases for guidance in determining whether plaintiff's claims fall within the scope of the arbitration clause.

Rodgers Builders, Inc. v. McQueen, 76 N.C.App. 16, 23-24, 331 S.E.2d 726, 731 (1985) (citing Coach Lines v. Brotherhood, 254 N.C. 60, 67-68, 118 S.E.2d 37, 43 (1961), and quoting Cyclone Roofing Co. v. LaFave Co., 312 N.C. 224, 229, 321 S.E.2d 872, 876 (1984), disc. review denied, 315 N.C. 590, 341 S.E.2d 29 (1986)). Thus, the “interpretation of the terms of an arbitration agreement [is] governed by contract principles” as well. Trafalgar House Constr., Inc. v. MSL Enters., Inc., 128 N.C.App. 252, 256, 494 S.E.2d 613, 616 (1998). “Although we are not bound by federal case law, we may find their analysis and holdings persuasive.” Brown, 171 N.C.App. at 744, 615 S.E.2d at 88 (citing Huggard v. Wake County Hosp. Sys., 102 N.C.App. 772, 775, 403 S.E.2d 568, 570 (1991), aff'd per curiam, 330 N.C. 610, 411 S.E.2d 610 (1992)). “The trial court's findings regarding the existence of an arbitration agreement are conclusive on appeal where supported by competent evidence, even where the evidence might have supported findings to the contrary.” Sciolino v. TD Waterhouse Investor Servs., 149 N.C.App. 642, 645, 562 S.E.2d 64, 66 (2002) (citing Routh, 108 N.C.App. at 272, 423 S.E.2d at 794), disc. review denied, 356 N.C. 167, 568 S.E.2d 611 (2002). However, “[t]he trial court's conclusion as to whether a particular dispute is subject to arbitration is a conclusion of law, reviewable de novo by the appellate court.” Raspet, 147 N.C.App. at 136, 554 S.E.2d at 678.

C. Propriety of Denial of Motion to Compel Arbitration

On appeal, Defendant argues that the trial court “erred by failing to compel arbitration of the disputes and stay the litigation.” We agree.

A careful review of the record demonstrates that a number of pertinent facts, including the following, are not in dispute between the parties:

Defendant is The Elevator Channel's CEO and a Board member.

Plaintiffs each purchased stock in The Elevator Channel on several occasions.

In connection with each purchase of stock, Plaintiffs signed an SSA, a contract between The Elevator Channel and the Plaintiff-signatories.

Defendant signed the SSAs on behalf of The Elevator Channels.

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